First National Bank of Dad

The Wall Street Journal reports that the average cost to raise a child from birth to 18 is well over $200,000.

Happy Father's Day. In the spirit of the other 364 days of giving, let's just own up to the fact that today is another day of giving. So, set down your “some assembly required” outdoor heating lamp and let's manage this institution called the “First National Bank of Dad”—or as my niece calls it: Daddybank.

Unlike the CEOs of Citibank, Chase and WellsFargo, we manage our ‘banks' for the betterment of our ‘customers'. A study released by United College Marketing Services shows that consumer debt habits were most influenced by household credit habits. It further drew parallels in student loan amounts, FICO scores, and age of first homeownership.

Principals of managing your bank include:

  • Teach delayed gratification. Daddy, I want this now can be converted to, “How would you like that video game PLUS $4 interest if you can wait four weeks”. Another example is, “Daddy will pay you $20 if you put Grandma's money into the bank and not touch it until December”… “Yes, the offer for $10 is good for half Grandma's gift.”
  • Exemplify budgeting.
  • Money isn't a substitute for love.
  • Incentivize your kids to CHARGE interest. The interest equation has a right side and a wrong side. No age is too early to start earning interest.
  • Run a DaddyBank. It can be as simple as a sheet of paper that credit and debits little Bobby's transactions. It can be as detailed as a promissory note, “Offered Xbox game plus $4 June 18 th ”. It can be as complex as, “Bobby owes the Chiang family $300 at 12% interest”.
  • DaddyBank's monetary policy is not to be compared to other DaddyBanks. In other words, don't compare this family with other families.

What happens money management wise in your house can be a springboard of knowledge for how the world works. If Bobby starts asking why Ben Bernake's push of the reserve rate doesn't bump his return higher, maybe you've gone overboard. If your kid isn't asking that in lieu of getting grounded, if he can just pay a higher rate on his debt, maybe you aren't doing enough.

This all may be in the interest of financially educating your kids but you can view it as another weapon in your arsenal. Threatening a weekend grounding can be lose-lose with his moping around the house depressing Mom too, but overtures about raising Bobby's interest rate might just get him back home at 11pm.